How to enter trade-ins

Bloody accountants, you really should read and understand the question, then have a look at the result.

Greg

Upon further investigation into the handling of sales taxes and trade-ins, I conclude that I can not simply enter a negative number for the trade-in. The selling price after trade, is always above the cost of the new item, so therefore a trade-in doesn't have any cost. A negative amount on the invoice would put it into inventory at some cost other than zero. True, the sales tax would be correct, but that's all. The other suggestion was to charge the tax on the entire sale, and while that would be ok for COGS, it wouldn't give me the correct amount for sales tax. I gotta do some more thinking on how to handle it. I sent an e-mail to the Dept of Revenue and they said the sales tax is only on the difference between the new item and the trade-in allowance. "Assuming the trade is of like kind and character to that purchased, the sales tax is on the $150 ($200 minus $50 trade-in). Taxpayer Education, Tennessee Dept of Revenue". With MS-Money it was always a trade off on whether I wanted the COGS to be correct or the sales tax to be correct. I went with COGS and kept the sales tax in a notebook. My notebook was correct but it never equaled the software amount. Might have to do that with QB, too.

Bob

Oh my, Bobby Boy did his homework and sees that Greg's method is for s*it.

His observation deserves a gold star. Now to the issue at hand, who will solve the problem and receive a Black Belt in QB from Allan Martin?

How can one issue an invoice with a trade-in where the user wishes to track the trade in item in inventory and override the sales tax calulation because the trade-in reduces the basis for the tax calculation.

There is an answer. Put on your thinking caps. This one is not simple.

I have been following this thread with much amusement. I will give it a try Allen. Seems to me I would enter the sale as widget with trade in at the price less the trade, the sales tax is then accounted for on the correct amount and then add the trade in as a new inventory item with appropriate value. Just a guess.

NIce try but no Black Belt. There are numerous fllaws in your answer but the one that stands out the most is as follows:

If you simply reduce the sales price then your sales are understated.

This has nothing to do with QB and everything to do with accounting.

Thanks Tee, here I was under the delusion that QB was an accounting program and not a glorified wordprocesor used to create invoices, etc.

You're intentionally missing the point.

If your trying to make a point then I am missing it. I can assure you it is not intentional. I do not understand what you are trying to say.

Yes, this is how I'll do it, except when entering it into inventory, I have, in effect, purchased it from the customer for zero dollars. As for how it is done within QB, I think a sale to the customer on the new one and then a purchase from the customer for zero dollars for the trade-in. I don't think there is a way within QB to put it all on one invoice. The details of the transaction will be on the sales slip if there is ever a question on the origination of the QB entries.

Bob

I'm trying to say that knowing how to correctly handle a trade-in isn't a Quickbooks mastery skill or titling event but an accounting datapoint. QB is a database & entry tool that has absolutely no controls in place to keep people from incorrectly recording their books. Using an accounting program does not imply that a person knows a whole lot about accounting therefore the answer to your question is an accounting one and not a QB one.

There is a way to do this in QB. Who is up to the challenge? Post your answer.

To come up with the correct answer one must have more than a passing knowledge of QuickBooks. I do not hand out QB Black Belts unless the user shows excellence in QB procedures. Telling us that not all accounting program users know accounting is stating the obvious and has nothing to do with the problem.

Could it be that you are not trying hard to get the belt because you think you do not look good in black?

If you don't know the breakdown of an accounting transaction then I don't see how little or even great knowledge of QB can help.

Which is why I thought you were intentionally missing my point. It was an obvious one.

I'm not trying at all because I can just ask one of several accountants to give me the answer. I currently don't understand how a trade-in could have zero cost or value when a value was assigned to reduce the original sale transaction which would have resulted in a cost to the business. My accountants would happily tell me the answer, explain the "why" of it and do so without condescension.

From my perspective, if I can easily do it with paper and pencil in a journal and ledger, but can't do it with QB, then the question is not one of accounting but rather how to accomplish a QB task that is otherwise a simple accounting task.

Bob

If they can tell you how to set this up in QB then they to shall receive a black belt. Personally I doubt any of them can.

See, even Bobby Boy knows Tee is full of beans.

Because we don't pay a customer for his old widget. We work a margin between supposed retail and cost. You can talk me down the same amount without giving me your old widget. Otherwise, I'll have your old widget for nothing and sell at the same price.

Bob

If the explanation is that simple then why wouldn't a discount line item on the invoice to reduce the taxable sale then a New Item entry for Inventory Part with zero cost and whatever assigned sale price work? If I understand the accounting principle (which I obviously don't) then I'm fairly confident I'll know the entry method in QB.